ENP Newswire -
Release date- 01082014 -
Second quarter 2014 results include
Commenting on the second quarter results,
We also benefited during the quarter from reprocessing and selling some PGM ounces from inventories that had accumulated over the past year. The drive to produce profitable ounces is evidenced by the$27.6 million increase in our net cash position, which is pleasing considering recycling gross working capital also increased by
'We continue to focus on controlling our capital and operating costs, recognizing that cost management is a profit driver we can control, irrespective of future metal price behavior, which we cannot. Efforts to control costs during the quarter included paring back our workforce through both voluntary and involuntary severance programs; completing a detailed assessment of the profit contribution of each mining area within the
'The Company is also benefiting from strong underlying market fundamentals in our key products, palladium and platinum. Growth in automotive production worldwide and ever more stringent emission standards combine to ensure expanding demand for these metals, while supply remains constrained.
Significant labor difficulties in
'This year's second quarter saw a modest decline in mine output over the previous quarter, all at the
In furthering this objective we may reduce production for a time in order to bypass unprofitable stopes until we have the appropriate infrastructure in place to maximize profitability. Tonnages mined at the
'During the quarter we commenced stoping from the first stope in the
Based on these results and current forecasts we are updating our 2014 guidance for total mined production to a range of 510,000 - 525,000 palladium and platinum ounces and are improving our 2014 guidance for all-in sustaining costs (a non-GAAP measure) to a range of
All-in sustaining costs per mined ounce guidance for 2014 assumes the exclusion of approximately
In the second quarter of 2014, the Company's
Second Quarter Mine Production Comparison
Revenue from the Company's Mine Production segment for the second quarter of 2014 (including proceeds from the sale of by-products) totaled
As a result of earlier constraints on reprocessing slag inventories at the
The Company processed recycling material containing 134,300 ounces of palladium, platinum and rhodium through its smelter and refinery during the second quarter of 2014. This represents a decrease of 23.3% from the record total of 175,000 ounces processed during the second quarter of 2013. Recycling volumes increased relative to the
Second Quarter Recycling Ounces Processed Comparison
Recycling sales volumes for the second quarter of 2014 decreased by 29.1%, to 101,400 ounces from 143,100 ounces sold in the second quarter of 2013.
The Company is utilizing a non-GAAP measure of mining efficiency, All-in Sustaining Costs (AISC), in monitoring and managing its performance going forward.
This measure is calculated beginning with total cash costs per mined ounce, net of credits (another non-GAAP measure), and adding to it the recycling income credit; domestic corporate overhead and marketing costs (excluding any depreciation and amortization costs as well as research and development, non-recurring and reorganization costs included in corporate overhead costs); plus that portion of total capital expenditures associated with sustaining the current level of mining operations.
The resulting measure provides a comparative indication of the all-in resources consumed in any period to sustain the mining operations and produce at current levels.
Combined total cash costs per mined ounce, net of by-product and recycling credits, (a non-GAAP measure) averaged
Of the Company's second quarter consolidated cash balance,
Net cash provided by operating activities (which includes changes in working capital) totaled
Outstanding balance sheet debt at
The increase in the debt balance during 2014 is attributable to the accretion of the discount on the Company's outstanding 1.75% convertible debentures.
During the second quarter of 2014, the Company and
The Company's existing platinum sales agreement with Tiffany is excluded from the
The contract contains a clause allowing Stillwater the ability to terminate the supply arrangement for a nominal fee. The Company, at its sole discretion, may terminate the refining arrangement after four years, in which event the Company shall pay the same nominal fee to
Subsequent to the end of the 2014 second quarter, the Company redeemed the entire
The Company's total workforce at
The Company continues to examine potential alternatives to realize value from Altar, its copper-gold prospect in
The Company owns a 75% interest in the
At this time there is no assurance that these alternatives will provide the economic improvement required to make the project viable. The Company is maintaining its tenure position at Marathon and looking for opportunities to realize value from the project in the future. However, until such time as the project is able to demonstrate viable economics, the Company has scaled back spending on the Marathon project.
Second Quarter Results - Details
For the second quarter of 2014, the
Costs of metals sold (before depletion, depreciation and amortization expense) decreased to
General and administrative (G&A) costs were
The second quarter of 2014 included reorganization costs of
Exploration expenses were
Interest expense in the second quarters of 2014 and 2013 was
During the second quarter of 2014, the Company recorded a net foreign currency transaction gain of
First Six Months' Results - Details
During the first six months of 2014, the
Costs of metals sold (before depletion, depreciation and amortization expense) decreased to
General and administrative (G&A) costs were
The six-month period ended
Marketing expenses declined to
Interest expense for the first six months of 2014, and 2013 was
During the six-month periods ended
The Company is engaged in the development, extraction, processing, smelting and refining of PGMs from a geological formation in southern
The Company also owns the
Some statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), and, therefore, involve uncertainties or risks that could cause actual results to differ materially. These statements may contain words such as 'believes,' 'anticipates,' 'plans,' 'expects,' 'intends,' 'estimates,' 'will' or similar expressions.
Such statements also include, but are not limited to, comments regarding expansion plans, costs, grade, production and recovery rates; permitting; financing needs and the terms of future credit facilities; exchange rates; capital expenditures; increases in processing capacity; cost reduction measures; safety; timing for engineering studies; environmental permitting and compliance; litigating; labor matters and the palladium, platinum, copper and gold market.
The forward-looking statements in this report are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. These statements are not guarantees of the Company's future performance and are subject to risks, uncertainties and other important factors that could cause its actual performance or achievements to differ materially from those expressed or implied by these forward-looking statements.
Additional information regarding factors that could cause results to differ materially from management's expectations is found in the section entitled 'Risk Factors' in the Company's 2013 Annual Report on Form 10-K, in its quarterly Form 10-Q filings, and in corresponding filings with Canadian securities regulatory authorities.
The Company intends that the forward-looking statements contained herein be subject to the above-mentioned statutory safe harbors. Investors are cautioned not to rely on forward-looking statements. The forward looking statements herein speak only as of the date of this release. The Company disclaims any obligation to update forward-looking statements.
Reconciliation of Non-GAAP Measures to Consolidated Costs of Revenues
The Company utilizes certain non-GAAP measures as indicators in assessing the performance of its mining and processing operations during any period. Because of the processing time required to complete the extraction of finished PGM products, there are typically lags of one to three months between ore production and sale of the finished product. Sales in any period include some portion of material mined and processed from prior periods as the revenue recognition process is completed.
Consequently, while costs of revenues (a GAAP measure included in the Company's Consolidated Statements of Comprehensive Income (Loss)) appropriately reflects the expense associated with the materials sold in any period, the Company has developed certain non-GAAP measures to assess the costs associated with its producing and processing activities in a particular period and to compare those costs between periods.
While the Company believes that these non-GAAP measures may also be of value to outside readers, both as general indicators of the Company's mining efficiency from period to period and as insight into how the Company internally measures its operating performance, these non-GAAP measures are not standardized across the mining industry and in most cases will not be directly comparable to similar measures that may be provided by other companies.
These non-GAAP measures are only useful as indicators of relative operational performance in any period, and because they do not take into account the inventory timing differences that are included in costs of revenues, they cannot meaningfully be used to develop measures of earnings or profitability.
Total Consolidated Costs of Revenues: For the Company as a whole, this measure is equal to total costs of revenues, as reported in the Consolidated Statements of Comprehensive Income (Loss). For the
The resulting total costs of revenues measures for the
Total Cash Costs (Non-GAAP): This non-GAAP measure is calculated as total costs of revenues (for each mine or combined) adjusted to exclude gains or losses on asset dispositions, costs and profit from recycling activities, revenues from the sale of mine by-products, depreciation and amortization and asset retirement costs, and timing differences resulting from changes in product inventories. The Company uses this measure as a comparative indication of the cash costs related to production and processing operations in any period. It is a measure of extraction efficiency.
When divided by the total tons milled in the respective period, Total Cash Costs per Ton Milled (Non-GAAP) -- measured for each mine or combined-provides an indication of the level of cash costs incurred per ton milled in that period. Because of variability of ore grade in the Company's mining operations, production efficiency underground is frequently measured against ore tons produced rather than contained PGM ounces.
Because ore tons are first weighed as they are fed into the mill, mill feed is the first point at which production tons are measured precisely. Consequently, Total Cash Costs per Ton Milled (Non-GAAP) is a general measure of production efficiency, and is affected both by the level of Total Cash Costs (Non-GAAP) and by the volume of tons produced and fed to the mill.
When divided by the total recoverable PGM ounces from production in the respective period, Total Cash Costs per Ounce (Non-GAAP) -- measured for each mine or combined-provides an indication of the level of cash costs incurred per PGM ounce produced in that period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period.
Because ultimately extracting PGM material is the objective of mining, the cash cost per ounce of extracting and processing PGM ounces in a period is a useful measure for comparing extraction efficiency between periods and between the Company's mines. Consequently, Total Cash Costs per Ounce (Non-GAAP) in any period is a general measure of extraction efficiency, and is affected by the level of Total Cash Costs (Non-GAAP), by the grade of the ore produced and by the volume of ore produced in the period.
All-In Sustaining Costs (Non-GAAP): This non-GAAP measure is used as an indicator from period to period of the level of total cash required by the business to maintain and operate the existing mines, including corporate administrative costs and replacement capital.
The measure is calculated beginning with total cash costs, net of credits, (another non-GAAP measure, described above), and adding to it the recycling income credit, domestic corporate overhead costs and marketing costs (excluding any depreciation and amortization costs as well as research and development, non-recurring and reorganization costs included in corporate overhead costs), and that portion of total capital expenditures associated with sustaining the current level of mining operations.
When divided by the total recoverable PGM ounces in the respective period, All-In Sustaining Costs per Mined Ounce (non-GAAP) provides an indication of the level of total cash required to maintain and operate the mines per PGM ounce produced in the period. Recoverable PGM ounces from production are an indication of the amount of PGM product extracted through mining in any period.
Because the objective of PGM mining activity is to extract PGM material, the all-in cash costs per ounce to produce PGM material, administer the business and sustain the operating capacity of the mines is a useful measure for comparing overall extraction efficiency between periods. This measure is affected by the total level of spending in the period and by the grade and volume of ore produced.
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